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Exam 23: Performance Evaluation Using Variances From Standard Costs

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Question 81

True/False

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At the end of the fiscal year, the variances from standard are usually transferred to the finished goods account.

A) True
B) False

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Question 82

Multiple Choice

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Calculate the fixed factory overhead volume variance using the above information:

A) $1,701 Favorable
B) $4,866.75 Unfavorable
C) $1,701 Unfavorable
D) $4,866.75 Favorable

E) A) and D)
F) B) and C)

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Question 83

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The following data is given for the Harry Company: Overhead is applied on standard labor hours. The direct labor time variance is:

Oak Company produces a chair that requires 6 yds. of material per unit. The standard price of one yard of material is $7.50. During the month, 8,500 chairs were manufactured, using 48,875 yards. Journalize the entry to record the standard direct materials used in production.

The Finishing Department of Pinnacle Manufacturing Co. prepared the following factory overhead cost budget for October of the current year, during which it expected to operate at a 100% capacity of 10,000 machine hours: During October, the plant was operated for 9,000 machine hours and the factory overhead costs incurred were as follows: indirect factory wages, $16,400; power and light, $10,000; indirect materials, $3,000; supervisory salaries, $12,000; depreciation of plant and equipment, $8,800; insurance and property taxes, $3,200. Prepare a factory overhead cost variance report for October. (The budgeted amounts for actual amount produced should be based on 9,000 machine hours.)

Define nonfinancial performance measures. What are they used for and what are some common examples?

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 favorable.

A favorable cost variance occurs when

The total manufacturing cost variance consists of:

Ideal standards are developed under conditions that assume no idle time, no machine breakdowns, and no materials spoilage.

The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of $12.40 per hour. Original production had been budgeted for 1,100 units, but only 1,000 units were actually produced. Labor standards were 7.6 hours per completed unit at a standard rate of $13.00 per hour. Compute the labor rate variance.

Though favorable volume variances are usually good news, if inventory levels are too high, additional production could be harmful.

If at the end of the fiscal year the variances from standard are significant, the variances should be transferred to the:

The direct labor time variance measures the efficiency of the direct labor force.

The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance.

The following data relate to direct labor costs for the current period: What is the direct labor time variance?

The Lucy Corporation purchased and used 129,000 board feet of lumber in production, at a total cost of $1,548,000. Original production had been budgeted for 22,000 units with a standard material quantity of 5.7 board feet per unit and a standard price of $12 per board foot. Actual production was 23,500 units. Compute the material price variance.

If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $5,200 favorable.

One reason not to depend solely on historical records to set standards is that there may be inefficiencies contained in past costs.

The following data is given for the Bahia Company: Overhead is applied on standard labor hours. The factory overhead volume variance is: